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10-27-2015 FC CLOSED SESSION Closed Meeting of the EDA Finance Committee AGENDA Thursday, October 27, 2015 Immediately following the EDA Finance Committee meeting Elk River City Hall Orono Conference Room 1. CALL MEETING TO ORDER 2. CLOSED MEETING – MN Statute 13D.05, Subd. 3(b) Attorney-Client Privilege – Ethanol Technology of Minnesota, LLC 3. ADJOURNMENT Meeting Protocol No sidebar discussions No interruptions State your concern Ensure you understand Don’t take things personally Adhere to time limits Come prepared Ensure all are heard Request for Action To Economic Development Authority Finance Committee Item Number 4.1 Agenda Section General Business Meeting Date October 27, 2015 Prepared by Amanda Othoudt, EDD Item Description Ethanol Technology of Minnesota, LLC Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Hear update regarding Ethanol Technology of Minnesota, LLC., and provide a recommendation to the EDA to proceed with the collection of the debt. Background/Discussion In August 2008, the EDA approved a Micro Loan in the amount of $74,000 for Ethanol Technology of MN, LLC to assist in the purchase of equipment and complete remodeling for the expanded business venture. The term of the loan is a 10-year amortization; 5-year balloon payment. The rate was fixed at 3%. The loan was secured by a 2nd position lien on equipment, inventory, accounts receivable, real estate and personal guarantee. In addition, the company was required to create 7 fulltime positions at $15/hour wages within 2-years. The Micro Loan was structured as a participation loan with First National Bank of Elk River. The balance due on the EDA loan is $66,729.66. At the September EDA Finance committee meeting, staff was directed to have our legal counsel provide an updated cost estimate to collect the debt owed by Ethanol Technology of Minnesota, LLC. Staff is requesting a recommendation from the Finance Committee to the EDA to begin legal action in an effort to collect the debt owed by Ethanol Technology of Minnesota, LLC. Financial Impact The estimated cost to collect the debt from the borrower would range upward of $2,500 to $3,000. Attachments  EDA Finance staff memo dated June 23, 2014  EDA Finance staff memo dated September 22, 2015  Campbell Knutson letter dated October 5, 2015  Draft Notice of Default to Ethanol Technology of Minnesota, LLC  Draft Notice of Default to Barton C. Wells  Draft Notice of Default to Hitech Motorsport, Inc. Request for Action To Economic Development Authority Finance Committee Item Number 4.2 Agenda Section General Business Meeting Date September 22, 2015 Prepared by Amanda Othoudt, EDD Item Description Uncollectable Microloans Reviewed by Cal Portner, City Administrator Reviewed by Action Requested Hear update regarding uncollectable microloans. Background/Discussion Staff has identified two uncollectable microloans, Ethanol Technology and Sweet P's that are still reflected on the financial statements. There has been no activity to Ethanol Technology since September of 2011 and with Sweet P's since April of 2014. During the audit each year, we are questioned as to the validity of these microloans and whether they should remain on the financial statements. Staff is looking for direction from the EDA finance committee on the interest to continue pursuing collection of these loans. Financial Impact N/A Attachments  EDA Finance staff memo dated June 23, 2014 171603v1 [EDA Letterhead] October 23, 2015 One notice sent via U.S. Mail One notice sent via U.S. Certified Mail Hitech Motorsport, Inc. 16820 Highway 10 N.W. Elk River, Minnesota 55330-6104 NOTICE OF DEFAULT Re: Lender: First National Bank of Elk River (“Bank”) Participant: Elk River Economic Development Authority (“EDA”) Promissory Note Dated: August 25, 2008 Original Loan Amount: $74,000.00 Dear Sir or Madam: This letter is to inform you that a default has occurred under the terms, covenants and conditions of the above-referenced Promissory Note and Security Agreement executed by Ethanol Technology of Minnesota, LLC dated August 25, 2008 which secures the above- referenced Promissory Note. You are hereby informed that as a Participant to the Promissory Note and Security Agreement by Agreement between the EDA and First National Bank of Elk River dated August 25, 2008, the EDA intends to take any and all actions permitted under the terms and conditions of the Promissory Note and the Security Agreement unless the default is cured. The EDA further notifies you that, as a result of the default by Ethanol Technology of Minnesota, LLC under the Promissory Note and Security Agreement dated August 25, 2008 between Ethanol Technology of Minnesota, LLC and First National Bank of Elk River which you guaranteed payment of, the EDA will take any and all actions permitted under the Guaranty including, but not limited to, repossessing the Property as described in the Security Agreement if the default is not cured on or before October _____, 2015. Sincerely, ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY By: Its: 171603v1 [EDA Letterhead] October 23, 2015 One notice sent via U.S. Mail One notice sent via U.S. Certified Mail Barton C. Wells 16820 Highway 10 N.W. Elk River, Minnesota 55330-6104 NOTICE OF DEFAULT Re: Lender: First National Bank of Elk River (“Bank”) Participant: Elk River Economic Development Authority (“EDA”) Promissory Note Dated: August 25, 2008 Original Loan Amount: $74,000.00 Dear Sir or Madam: This letter is to inform you that a default has occurred under the terms, covenants and conditions of the above-referenced Promissory Note and Security Agreement executed by Ethanol Technology of Minnesota, LLC dated August 25, 2008 which secures the above- referenced Promissory Note. You are hereby informed that as a Participant to the Promissory Note and Security Agreement by Agreement between the EDA and First National Bank of Elk River dated August 25, 2008, the EDA intends to take any and all actions permitted under the terms and conditions of the Promissory Note and the Security Agreement unless the default is cured. The EDA further notifies you that, as a result of the default by Ethanol Technology of Minnesota, LLC under the Promissory Note and Security Agreement dated August 25, 2008 between Ethanol Technology of Minnesota, LLC and First National Bank of Elk River which you guaranteed payment of, the EDA will take any and all actions permitted under the Guaranty including, but not limited to, repossessing the Property as described in the Security Agreement if the default is not cured on or before October _____, 2015. Sincerely, ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY By: Its: 171603v1 [EDA Letterhead] October 23, 2015 One notice sent via U.S. Mail One notice sent via U.S. Certified Mail Ethanol Technology of Minnesota, LLC 16820 Highway 10 N.W. Elk River, Minnesota 55330-6104 NOTICE OF DEFAULT Re: Lender: First National Bank of Elk River (“Bank”) Participant: Elk River Economic Development Authority (“EDA”) Promissory Note Dated: August 25, 2008 Original Loan Amount: $74,000.00 Dear Sir or Madam: This letter is to inform you that a default has occurred under the terms, covenants and conditions of the above-referenced Promissory Note and Security Agreement executed by Ethanol Technology of Minnesota, LLC dated August 25, 2008 which secures the above- referenced Promissory Note. You are hereby informed that as a Participant to the Promissory Note and Security Agreement by Agreement between the EDA and First National Bank of Elk River dated August 25, 2008, the EDA intends to take any and all actions permitted under the terms and conditions of the Promissory Note and the Security Agreement unless the default is cured on or before October _____, 2015. Sincerely, ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY By: Its: